Half-year Report 2011 Royal FrieslandCampina N.V. 2 Half-year Report 2011

Highlights first half of 2011 Revenue up, profit down, higher milk price

• Net revenue up by 9.3 percent (adjusted • Operating profit down by 11.8 percent to for currency translation effects up by 210 million euro due to pressure on margins in 10.3 percent) to 4,730 million euro due Europe, investments in the organisation and to higher selling prices and volume growth negative currency translation effects • The Consumer Products International and • Profit down by 18.6 percent to 127 million euro. Ingredients business groups developed positively Corrected for the amendment of the guaranteed and contributed towards the result. Cheese, price calculation and profit appropriation, profit Butter & Milkpowder improved its result, the down by 7.1 percent result of Consumer Products Europe fell due to • Cash flow from operating activities down to pressure on margins 63 million euro (first half of 2010: 85 million euro) • Market shares increased or maintained virtually • Pro forma milk price up by 19.3 percent to across the board 38.63 euro per 100 kilos of milk, of which • Achievement of the route2020 strategy on 0.50 euro per 100 kilos of milk is the positive schedule with investments in infant & toddler effect of the adjustment of the guaranteed price nutrition production and marketing & innovation calculation and profit appropriation

Net revenue Operating profit Operating profit as a percentage in millions of euros in millions of euros of revenue in % 10,000 500 10 8,972 9,000 450 434 9 8,160 8,000 400 8 4,644 196 7,000 4,056 350 7 6,000 300 6 5.5 258 4.8 5,000 250 5 4.4 4,000 148 4,730 200 238 4 3.2 3,000 4,104 4,328 150 210 3 2.7 2,000 100 2 1,000 50 110 1 0 0 0 2009 2010 2011 2009 2010 2011 2009 2010 2011 ■■■ first half-year eerstefirst ■■■ first half-year eerstefirst ■■■ first half-year eerstefirst ■■■ second half-year half-yearhalfjaar ■■■ second half-year half-yearhalfjaar ■■■ year half-yearhalfjaar

Profit Operating cash flows Pro forma milk price in millions of euros in millions of euros in euros per 100 kilogram, excl of VAT

400 1,000 40 38.63 360 900 36 34.35 786 32.38 320 800 32 285 27.34 280 700 517 28 26.59 240 129 600 24 200 182 500 444 20 160 400 16 104 359 120 156 300 12 80 127 200 8 269 40 78 100 63 4 0 0 85 0 2009 2010 2011 2009 2010 2011 2009 2010 2011 ■■■ first half-year eerstefirst ■■■ first half-year eerstefirst ■■■ first half-year eerstefirst ■■■ second half-year half-yearhalfjaar ■■■ second half-year half-yearhalfjaar ■■■ year half-yearhalfjaar Royal FrieslandCampina N.V. 3

Key figures

2011 2010 2010 first first full half-year half-year year Results in millions of euros

million Net revenue 4,730 4,328 8,972 4,730 210 238 434 Operating profit Revenue up by 9.3% Profit for the period 127 156 285

Balance sheet in millions of euros 2 % Balance sheet total 5,544 5,206 5,299 39.1 2,166 1,937 2,071 Group equity Solvency stable Equity attributable to shareholder in the Company 2,057 1,828 1,961 Net debt 1 920 937 776 Group equity as a percentage of the balance sheet total 39.1% 37.2% 39.1%

Cash flow in millions of euros 2 131million Net cash flow from operating activities 63 85 444 Investments in property, plant, equipment Investment in and intangible assets 131 75 261 Depreciation on buildings and equipment route2020 and Amortisation of intangible assets 95 106 210

Value creation for member dairy farmers in euros per 100 kilogram milk excl. VAT at 4.41% fat, 3.47% protein 2 euro Guaranteed price 2, 3 36.33 30.25 32.39 38.63 2, 4 1.38 1.33 1.23 Pro forma performance premium Pro forma milk price Pro forma reserve member bonds 2, 4 0.92 0.80 0.73 Pro forma milk price 2, 4 38.63 32.38 34.35 up by 19%

Additional information 2 4.5 billion Milk supplied by members in millions of kilos 4,513 4,511 8,821 Milk supply stabilises due to dry spring

1 The net debt relates to long-term interest-bearing debts, borrowings from financiers and the net obligations to/ receivables from affiliated companies, less cash and cash equivalents. 2 The method for calculating the 2011 guaranteed milk price and profit appropriation differs from the calculation method in previous years. The figures for 2010 have not been adjusted. 3 For 2011 this relates to the balance of the guaranteed price of 36.55 euro and an adjustment of -0.22 euro. 4 The definitive performance premium, reserve member bonds and milk price are determined on the basis of the profit figures for the whole year. 4 Half-year Report 2011

Developments in line with expectations

Cees ’t Hart, Chief Executive Officer of Royal FrieslandCampina: “Thanks to our broad product portfolio of dairy-based beverages, “The developments were in line with expectations. We achieved infant & toddler nutrition, cheese, butter, cream, desserts and growth in all four business groups and especially in Consumer functional ingredients combined with the geographic spread of our Products International and Ingredients. We are on schedule with the activities, we are in a position to offset disappointing developments adjustments in the organisation, the projects we have started and in one segment or region against positive developments in other the new working method of marketing and innovation we have segments and regions. This means that we, as FrieslandCampina, have implemented in the context of the achievement of the route2020 been able to show a series of robust results over a number of years. strategy. In 2013-2014 we expect to see more visible results in the achievement of route2020. “Margin improvement, particularly in Europe, will remain importan in the second half of the year. It will involve finding the right balance “The development of our ingredients activities is more than between volume, selling price and margin. The development of satisfactory. We are achieving good results with both special consumers’ spending power in various countries will play a major role. ingredients and commodities. We are also satisfied with the developments in Asia and Africa. In the majority of markets and “In order to achieve the route2020 strategy we have started an product categories we succeeded in passing on the higher raw investment programme amounting to over 300 million euro. At the materials costs and increasing volumes. The increased price of dairy same time, we will pay close attention to further cost control. products has, however, put sales volumes under pressure in a number of markets. The Cheese, Butter & Milkpowder business group “This year we have amended the profit appropriation of previous achieved a further improvement of its result due to a higher margin, years. Fifty percent of the profit will now be at the disposal of the in part thanks to cost control. The operating profit was still negative. cooperative’s members rather than forty percent. The pro forma milk Economic developments are under pressure in many European price for FrieslandCampina’s member dairy farmers amounts to countries. Unemployment is rising and consumers in nearly every 38.63 euro per 100 kilos of milk – around 19 percent higher than for country are still reluctant to spend due to the economic uncertainty. the first half of 2010.” There is no growth in consumption and consumers remain extremely susceptible to low prices and product promotion campaigns. In Germany in particular the necessary price increases could not be passed on to the market. In the difficult European market we did succeed in increasing the market share of most brands or maintaining the market share at the same level as last year. The outcome of all this was a 0 million euro result for the Consumer Products Europe business group. Royal FrieslandCampina N.V. 5

First half of 2011: revenue up due to price rises and volume growth FrieslandCampina invests in further growth

In the first half of 2011 the net The operating profit of FrieslandCampina Market developments in the revenue of Royal FrieslandCampina was virtually the same as for the first half of first half of 2011 N.V. rose by 9.3 percent to 2010. Profit for the period fell by 29 million The global demand for dairy produce from euro (18.6 percent) to 127 million euro. Of both consumers and industrial customers 4.7 billion euro. Corrected for the this decrease, 18 million euro was due to the developed positively during the first half of currency translation effect the net amendments to the calculation of the 2011. This development has been the trend revenue rose by 10.3 percent. guaranteed price and the profit appropri­ since the second half of 2009. Economic Higher selling prices and a growth ation in 2011 compared with previous years. growth, especially in China and India but also in South America, has contributed towards in the sales volumes of consumer The good results of the Consumer Products this. In the Benelux the demand for dairy products, especially in Asia and International and Ingredients business produce has remained stable while in Africa, and of ingredients groups and the improvement to the result of Germany and South and South-East Europe contributed towards the higher the Cheese, Butter & Milkpowder business the demand has fallen. group offset the disappointing results of The supply of milk has increased globally. revenue. Brands such as Peak Consumer Products Europe. In the difficult During the first half of 2011 the conditions () and Friso (infant & toddler European market the higher prices for raw were favourable for dairy production. nutrition) performed well. The pro milk and other raw materials could not, could Despite the drought in Western Europe forma price for the milk supplied by not fully or could not immediately be passed during April and May, milk production in on in the selling price. The 6 percent revenue Europe rose by around 2 percent. Favourable FrieslandCampina member dairy growth achieved by Consumer Products weather conditions in the southern farmers rose by 19.3 percent to Europe could not offset the cost price hemisphere led to increased milk production 38.63 euro per 100 kilos of milk increase of 13 percent. Sales volume did in New Zealand, and Uruguay. (first half of 2010: 32.38 euro per increase slightly and the market share of most brands increased or remained the As the weak US dollar made the export of 100 kilos of milk). same. European products more difficult, American dairy producers were able to profit the most Of the over 300 million euro Friesland­ from the increasing global trade during the Campina anticipates investing during 2011, first half of 2011. The European dairy 131 million euro was invested during the industry could profit from the increasing first half of the year. The majority of the Russian demand for cheese, butter and investments were aimed at the achievement skimmed-milk powder. of the route2020 strategy.

Amendment of milk price method World market prices Butter In 2011 the profit appropriation and the calculation for the in USD/ton Whole milk powder guaranteed price for the milk supplied by the member dairy Skimmed milk powder farmers applicable during 2008-2010 have been amended. This has 5.500 had a negative effect of 18 million euro on the profit and a positive 5.000 effect of 0.50 euro per 100 kilos of milk on the milk price. Since 4.500 2011, 50 percent of the profit is at the disposal of the cooperative’s 4.000 members (was 40 percent) of which 30 percent is paid out to the 3.500 member dairy farmers as the performance premium on the milk 3.000 supplied and 20 percent is paid out in the form of fixed member 2.500 bonds. Since 2011, the calculation of the guaranteed milk price has 2.000 included any supplementary payment to and any supplementary 1.500 formation of equity in the name of the dairy farmers of the 2006 2007 2008 2009 2010 2011 reference companies. 6 Half-year Report 2011

For FrieslandCampina, World Milk Day on 1 June was an opportunity to share knowledge about milk.

The overall effect was that the listed prices The net revenue of the Consumer Products Operating profit and profit of dairy products such as milk powder, International business group (Asia, Africa, The operating profit for the first half of 2011 caseinates, butter, foil cheese and whey rose the Middle East, export) rose by 9.1 percent amounted to 210 million euro, 11.8 percent to levels approaching the record highs of to 1,205 million euro (first half of 2010: lower than for the first half of 2010 2007. There was, however, some downwards 1,104 million euro). The increase was due to (238 million euro). Operating profit as a price pressure on skimmed and whole milk higher selling prices and volume growth, in percentage of net revenue was 4.4 percent powder, whey and, more recently, also on particular of infant & toddler nutrition. The (first half of 2010: 5.5 percent). cheese. Even so, from a historical expensive euro compared to the US dollar perspective the listed prices remained high. and the Vietnamese dong led to a negative At 192 million euro Consumer Products In Europe the price development of dairy currency effect on revenue of 36 million International’s operating profit remained products for consumers could not keep pace euro. The Friso brand performed well in stable (first half of 2010: 197 million euro). with the price development of commodities. China and . There was some Although the business group managed to pressure on the market share of dairy-based maintain its margins reasonably successfully Higher net revenue beverages in Vietnam, and during the first months of 2011, the high During the first half of 2011 Friesland­ . price put sales volumes under pressure in a Campina’s net revenue rose by 9.3 percent number of countries. to 4,730 million euro. Higher prices were The net revenue of Cheese, Butter & responsible for the revenue rising by Milkpowder rose by 9.6 percent to The Ingredients business group increased its 410 million euro. The sales volume increased 1,389 million euro (first half of 2010: operating profit by 53.4 percent to 89 million and there was a shift in the sales volume 1,267 million euro). The increase was due to euro (first half of 2010: 58 million euro), from commodities to added-value products. the higher selling prices of commodities thanks to its good results from special Exchange rate variations (especially the high such as foil cheese, milk powder and butter. ingredients and higher prices for standard price of the euro compared to the US dollar) Sales volumes were lower than in the first products. had a negative currency effect amounting to half of 2010. 43 million euro. Consumer Products Europe’s operating Ingredients’ net revenue rose by 16.1 percent profit fell by 57 million euro to 0 million Consumer Products Europe’s net revenue to 943 million euro (first half of 2010: euro. The major reason for this was rose by 6.0 percent to 1,689 million euro 812 million euro) due to price increases and increased competition as a result of (first half of 2010: 1,594 million euro) increased sales volumes. The main stagnation in consumption, which meant the primarily due to the rise in selling prices. The contributor towards this was the high price increases of raw milk and other raw sales volumes of the brands remained the demand from Asia. materials could not, or could only partially same as in the first half of 2010. There was a and after a delay, be passed on in the selling slight increase in the volume of private label price. This put considerable pressure on products supplied to supermarkets. The margins. market share of most products remained the same as or was higher than in 2010. Royal FrieslandCampina N.V. 7

The Cheese, Butter & Milkpowder business The profit was appropriated as follows: Milk price determination system group achieved a negative operating profit 78 million to Zuivelcoöperatie Friesland­ As of the 2011 financial year Friesland­ of 29 million euro. Compared to the first half Campina U.A., the shareholder of Royal Campina’s milk price comprises the of 2010 (-46 million euro) this is an FrieslandCampina N.V., 17 million euro to the guaranteed price, the performance premium improvement of 17 million euro (37 percent) interest on member bonds, 4 million euro to and the value of the fixed member bonds per and was due to improved results from the providers of the perpetual notes and 100 kilos of milk. commodities. 28 million euro to minority interests. The guaranteed price is calculated on the The results of the business groups were Cash flow basis of the weighted average annual milk influenced by the attribution of the Cash flow from operating activities fell to prices for raw milk paid by the reference performance premium and the reserves 63 million euro (first half of 2010: 85 million companies (twelve German dairy companies, registered in the names of member dairy euro) due to the reduced profit. The reduced in Denmark, Bel Leerdammer, farmers in proportion to the quantity of cash flow is due to the lower profit as well as Cono Kaasmakers and DOC Kaas in the member milk received by the business the substantially higher working capital. The and Milcobel in ), and as groups. This had a particularly severe effect increase in working capital was due to of 2011 includes any supplementary payment on the result of Cheese, Butter & Milkpowder higher prices and an increase in the volume from the dairy cooperation to its members business group which processes around of inventories. Cash flow from investing and any formation of registered equity in the 55 percent of the member milk. activities rose as a result of increased names of members of these cooperatives. investments in property, plant, equipment The guaranteed price for the first half of 2011 In the first half of 2011 the result from joint and intangible assets. Total investments was 36.33 euro excluding VAT per 100 kilos ventures and associates was 5 million euro – amounted to 131 million euro (first half of of milk with 4.41 percent fat and 3.47 percent 3 million lower than in the first half of 2010. 2010: 75 million euro). protein (first half of 2010: 30.25 euro, whole Higher raw materials costs put these results of 2010: 32.39 euro). under pressure. Financing FrieslandCampina raises loans from different The amount of the performance premium Net financing income and expenses rose by groups of lenders (member dairy farmers, and the fixed member bonds depends on the 5 million euro, which resulted in an expense banks and investors). This enhances the Company’s financial performance. Thirty of 40 million euro. The net interest expense Company’s flexibility. The major portion of percent of FrieslandCampina’s profit based was 26 million euro (first half of 2010: the loan capital financing has been borrowed on the guaranteed price and after deduction 24 million euro). from financial institutions in and outside the of the recompense for member bonds and Netherlands. The major portion of the bank perpetual notes and the profit attributable to Taxation amounted to 48 million euro loans comprises a committed credit facility minority interests, is paid out to member (first half of 2010: 55 million euro). The amounting to 1 billion euro and with a term dairy farmers in cash as a performance effective tax rate rose from 26.5 percent to the end of August 2013. FrieslandCampina premium and 20 percent is reserved in the to 27.4 percent . has taken out private loans of 196 million names of the member dairy farmers. The dollar with institutional investors in the performance premium is paid out to the Profit over the first half year of 2011 United States and 25 million euro with a Cooperative’s members annually, after the amounted to 127 million euro (first half of European investor. financial statements have been adopted, in 2010: 156 million euro). The main reasons for proportion to the value of the milk they have this drop in profit were the amendments to Financial position supplied during the year in question. The pro the guaranteed price calculation and profit On 30 June 2011 net debt amounted to forma performance premium for the first appropriation, lower margins and the higher 920 million euro, 144 million euro more than half of 2011 amounted to 1.38 euro per investments in the organisation in the at the end of 2010. The increase was due to 100 kilos of milk excluding VAT. This is context of the achievement of route2020. additional financing requirements as a result 3.8 percent higher than the pro forma of the increase in working capital. performance premium for the first half of In the first half of 2011 operating expenses 2010 (1.33 euro per 100 kilos of milk). rose by 10.4 percent to 4,532 million euro On 30 June 2011 group equity amounted to (first half of 2010: 4,104 million euro). In the 2.166 million euro (end of 2010: 2.071 million In the first half of 2011 the pro forma reserve first half of 2011 the payment to member euro). Group equity was strengthened by registered in the names of member dairy dairy farmers, a component of operating adding the profit from 2010 to the farmers was 41 million euro. This amounts to expenses, was 23 percent higher at Company’s reserve. 0.92 euro per 100 kilos of milk (first half of 1,750 million euro (first half of 2010: 2010: 0.80 euro per 100 kilos of milk). Up to 1,420 million euro). Solvency (group equity as a percentage of and including last year the value of the fixed the balance sheet total) amounted to member bonds was not a component of 39.1 percent – the same as at the end of FrieslandCampina’s milk price. 2010. 8 Half-year Report 2011

At FrieslandCampina Domo’s facility in Beilen the production capacity is being increased with a new drying tower, mixing equipment and a packaging assembly line.

Compared to the first half of 2010 the The efforts in the field of marketing and The six value-drivers for value growth are: interest on member bonds rose by 15 million innovation are concentrated on the four • Worldwide growth in dairy-based euro to 17 million euro as a result of the priority platforms: growth & development, beverages by increasing the share in total increased Euribor. The profit attributable to daily nutrition, health & wellness and consumption. the Company’s shareholder (the functionality. The Research & Development • Strengthening worldwide market positions Cooperative) amounted to 78 million euro. organisation has been tuned to the value- in infant foods, both ingredients and end This is 30 million euro less than in the first drivers with a focus on dairy-based products. half of 2010, partly due to the amended milk beverages, infant & toddler nutrition and • Increased market share in branded price system. branded cheese. The R&D capacity in the cheese, including through expanding the field of infant & toddler nutrition is being brand portfolio. Progress of the route2020 strategy expanded further. A start has been made • Geographical growth in the above FrieslandCampina’s route2020 strategy is with the construction of the new categories and improving the strong aimed at growth and value creation in FrieslandCampina R&D Centre in positions outside of these categories. selected markets and product categories. Wageningen. • Foodservice in Europe: strengthening and To achieve the growth in the infant & toddler expanding existing strong positions in the nutrition segment, in 2011 a start was made As a consequence of route2020 out of home category, partly through on a 100 million euro investment programme FrieslandCampina has re-formulated its geographical expansion. in the Beilen and Bedum production CSR mission, vision and strategy. First and • Strengthening of basis products, such as facilities. Investments in Beilen will amount foremost FrieslandCampina will strive to standard ingredients, industrial cheese to 70 million euro and will cover the achieve its future growth in a climate-neutral and private labels in order to reduce the expansion of the mixing capacity, a new manner. FrieslandCampina’s CSR strategy share of member milk that is processed drying tower and a new infant food focuses on four priority areas. Two of these into commodities. packaging assembly line. Investments in areas – sustainable dairy farming and Bedum will amount to 30 million euro for sustainable production chains – are aimed at expanding the drying and processing the continuing reduction of the capacity for desalinated whey products, environmental burden created by which are used as ingredients for infant & FrieslandCampina’s activities. Nutrition & toddler nutrition. All the investment must be health relates primarily to combating completed in 2013. undernourishment and obesity. The fourth priority area – developing dairy farming in Asia and Africa – focuses on supporting farmers in countries in these regions. Royal FrieslandCampina N.V. 9

Composition of the Supervisory Board and Risks high prices for dairy products could lead to the Executive Board The risks and uncertainties that could have dairy products being replaced with other Supervisory Board an adverse material effect on the Company’s products. Minor fluctuations in supply and On 15 June 2011 the Member Council of result and shareholders’ equity were demand on the world market could have Zuivelcoöperatie FrieslandCampina U.A. described in the 2010 Annual Report. major consequences for the price appointed Sjoerd Galema and Hans Stöcker Reference to this description of risks and development of dairy products. Partly due to as members of the Board of Zuivelcoöperatie uncertainties should be deemed a this, FrieslandCampina cannot make any FrieslandCampina U.A. as of 14 December component of this half-year report. The concrete statement regarding the expected 2011 on which date they will also become major risks and uncertainties for the second result for the whole of 2011. members of the Supervisory Board of Royal half of 2011 are related to the development FrieslandCampina N.V. Messrs. Galema and of world-market prices and the availability of Responsibility statement Stöcker will fill the vacancies that will arise raw materials as well as foreign currency The Executive Board of Royal Friesland­ due to the resignation according to the exchange rate developments. Substantial Campina N.V. declares that the half-year roster of Jorrit Jorritsma and Kees changes in the prices of raw materials (for report, prepared in accordance with the Wantenaar on 14 December 2011 neither of example due to weather conditions), or a applicable reporting regulations for interim whom can be reappointed. Rob ter Haar will continuing scarcity of supply of certain reporting, gives a true and fair view of the also resign on 14 December 2011 and cannot products, could have a negative effect on assets, liabilities, financial position and profit be reappointed. His successor will be FrieslandCampina’s operating profit and of Royal FrieslandCampina N.V. and the announced before this date. financial position. Being able to pass on companies included in the consolidation; and higher cost prices depends on several that the half-year report gives a true and fair During the Board meeting on 9 August 2011 factors including the duration of contracts view of the situation on the balance sheet the then Vice-Chairman, Piet Boer, was and the ability of markets to pay the higher date, the business development during the elected as the new Chairman of the Board of prices. Too high prices for dairy products and first half of 2011 of Royal FrieslandCampina Zuivelcoöperatie FrieslandCampina U.A. dairy raw materials could lead to reduced N.V. and the associated companies for which which means also as the Chairman of the sales because dairy products are replaced by the financial information is recognised in the Supervisory Board of Royal Friesland­ cheaper products. FrieslandCampina has an half-year report and that the material risks Campina. Piet Boer will take over from Kees operating company in . The economic with which Royal FrieslandCampina N.V. is Wantenaar as Chairman on 15 December situation in that country and any resulting confronted are described in the half-year 2011. risks, such as a reduction in the population’s report in accordance with the Financial spending power and the financial situation of Supervision Act. the various parties in the chain, are being Executive Board followed very closely. Other risks and Cees (C.C.) ’t Hart There were no changes to the composition uncertainties that have not, as yet, been Chief Executive Officer of the Executive Board. recognised, or have not yet been considered significant, could in the future have a Kees (C.J.M.) Gielen European Commission conditions related to substantial effect on FrieslandCampina and Chief Financial Officer the merger its goals, revenue, results, assets and During the period 1 January – 30 June 2011, liquidity. Kapil (K.) Garg the Dutch Milk Foundation (DMF) approved 11 Chief Operating Officer requests from member dairy farmers Outlook Consumer Products International wishing to terminate their FrieslandCampina The economic outlook remains uncertain. In membership utilising the severance scheme Europe the expectation is that consumers Piet (P.J.) Hilarides of 5.00 euro per 100 kilos of milk. This will remain reluctant to spend due to the Chief Operating Officer scheme was set-up in 2008 by the European economic uncertainty and that the Cheese, Butter & Milkpowder Commission in connection with the merger consumption of dairy products will remain of Friesland Foods and Campina. under pressure. The uncertain economic Freek (F.) Rijna situation in several European countries Chief Operating Officer reinforces this view. At a global level, Consumer Products Europe although a continued gradual increase in dairy consumption is anticipated the effects of the unrest in the financial markets on Amersfoort, 26 August 2011 consumer confidence remain to be seen. Too 10 Half-year Report 2011

Consumer Products Europe • Revenue up due to higher selling prices • Low consumer confidence in Europe • Margins under considerable pressure • Market share of most brands the same or higher than in 2010

2011 2010 2010 first first full half-year half-year year

Net revenue 1,689 1,594 3,269 Operating profit 0 57 126 Operating profit as a % of net revenue 0 3.6 3.9

The Consumer Products Europe business Fresh daily dairy produce under the Campina completed in 2012 in order to take over some group can look back on a difficult first half brand developed positively in the of the production from Kalkar (Germany) year. This was due primarily to the falling Netherlands. For the first time in a number after which Kalkar will be closed. consumer confidence in Europe. Economic of years market share and volume rose. The In Greece, although revenue fell slightly due stagnation and uncertainty in a number of positioning of Dutch meadow milk was to the reduction in consumers’ spending countries led to higher unemployment and, successful. The Campina Open Farm Days in power, a good level of result was maintained. as a result, consumer spending was under the spring were also exceptionally popular FrieslandCampina Hellas continued investing pressure. Consumers remained price and and highlighted the relationship between the in marketing and promotional campaigns in promotional campaign sensitive and, farmer, the milk and the Campina brand. order to extend its leading market position. therefore, opted for cheaper products more Campina Optimel continued developing well The market share of most NoyNoy products often. Germany in particular faced increased and responded successfully to the growing developed positively. Investment in the price competition between dairy companies. demand for reduced-calorie products. As far Patras production facility will enable the as fruit juices were concerned, Appelsientje range of dairy products currently being In the first half of 2011 Consumer Products developed positively and the business unit produced in Kalkar (Germany) to be Europe’s net revenue was 1,689 million euro, was able to pass the increased price of fruit produced in Greece from 2012 on. a representing increase of 6 percent concentrates on to the market. Market Consumer spending also lagged behind in compared to the first half of 2010 shares increased. Hungary as a result of the economic (1,594 million euro) primarily due to higher In Germany the price development of dairy situation. Passing on the price increases prices. The sales volume of the brands was products lagged behind in comparison with when consumer spending power and the same as in the first half of 2010. The neighbouring countries. The competitive confidence were falling put pressure on the sales volume of private label products rose market made it impossible to implement the sales volume. slightly. Margin development of the different necessary price increases. Due to the In Russia the Fruttis brand developed well in dairy products lagged behind the increase in disappointing volume and margin 2010 and this positive trend continued in the the price of raw milk and other raw developments both revenue and result came first half of 2011. materials. Price increases could not, or could under pressure in Germany. Further volume After several difficult years, in Romania there only partially and after a delay be passed on increases were achieved with the Landliebe was a modest positive development in to the market. As a result, operating profit brand. In Belgium, expanding the production volumes although margins remain under fell to 0 million euro (first half of 2010: 57 capacity of the Aalter factory involved pressure. million euro). substantial investment. The work must be FrieslandCampina Professional had a difficult first half of 2011. High prices for fats could not be sufficiently passed on to the market, Key brands for one reason because in a number of other countries the prices of fats were far lower. In many cases annual contracts for spouty cream in a can had been signed, which meant price increases could not be passed on sufficiently. Sales volume was, however, maintained. Royal FrieslandCampina N.V. 11

Consumer Products International

• Higher revenue due to price increases and volume growth in infant & toddler nutrition • Margin development stagnation as a result of higher raw materials prices • High selling prices inhibit growth development

2011 2010 2010 first first full half-year half-year year

Net revenue 1,205 1,104 2,277 Operating profit 192 197 356 Operating profit as a % of net revenue 15.9 17.8 15.6

In the first half of 2011 the net revenue of the FrieslandCampina Wamco Nigeria can look FrieslandCampina Hong Kong and Consumer Products International business back on another good first half-year. Peak FrieslandCampina China developed very group rose by 9 percent to 1.2 billion euro. remained exceptionally successful and the positively and were particularly successful The increase was due to higher selling prices Three Crowns ‘value-for-money’ brand with Friso infant & toddler nutrition. and volume growth, especially of infant & performed well. Evaporated milk achieved In the positioning of the Dutch Lady toddler nutrition. The expensive euro the greatest growth in Nigeria. In July heavy brand was accentuated, which led to compared to the US-dollar and the rainfall resulted in the production facility in increased market share. Vietnamese dong led to a negative currency Lagos being flooded. Damage to several In Thailand the selling prices of dairy effect of around 36 million euro. In a number machines and the time needed to clean products were regulated, which meant price of countries volume was under pressure as a equipment, buildings and grounds meant increases could only be passed on to a result of lower demand due to the increased production came to a halt for a few days. limited degree. A new variety of Foremost price of dairy products and other food. Calcimex was introduced. Because of this and increasing price FrieslandCampina Middle East succeeded in In Indonesia the sales volume of sweetened competition, in a number of countries improving its market position. In Saudi condensed milk stagnated somewhat after margin development and market share came Arabia FrieslandCampina began cooperating the robust growth in 2010. Competition is under some pressure. The higher price of with a new distributor. The operating increasing in the area of infant food. raw materials, such as milk powder, sugar company’s regional office was relocated FrieslandCampina Vietnam was confronted and other ingredients, could not be passed from Jeddah (Saudi Arabia) to Dubai (United with the effects of higher food prices. For on in all cases. Finding the right balance Arab Emirates). It is anticipated that the the first time in years the demand for food between selling price, margin and volume activities throughout the region can be run shrunk. Price competition increased, which development is a key factor for success and better from Dubai. put some pressure on the market share of differs per market and product category. To FrieslandCampina Export saw its exports Dutch Lady and Friso. offset the pressure on margins cost savings increase, especially to countries in Central were implemented. Abundant investment in America and Africa. Export to Libya came to advertising and promotional campaigns did, a halt due to the unrest in the country and however, continue. Operating profit fell to the sanctions that were imposed. 192 million euro (first half of 2010: 197 million euro). Operating profit as a percentage of net revenue amounted to 15.9 percent (first half of 2010: 17.8 percent).

Key brands 12 Half-year Report 2011

Cheese, Butter & Milkpowder • Revenue rises due to higher selling prices • Profit improvement due to cost reductions and improved margin on commodities • Investments in efficiency improvements

2011 2010 2010 first first full half-year half-year year 1

Net revenue 1,389 1,267 2,641 Operating profit - 29 - 46 - 92 Operating profit as a % of net revenue - 2.1 - 3.6 - 3.5

The Cheese, Butter & Milkpowder business During the first half of 2011 FrieslandCampina Both the price level and margins of group achieved a further improvement of its Cheese achieved a 30 percent increase in FrieslandCampina Milkpowder developed revenue and profit. In the first half of 2011 the selling price of foil cheese. The price well. the net revenue of the Cheese, Butter & increase for branded cheeses lagged behind. Milkpowder business group rose to The necessary price increases could only be As a result of the reorganisations announced 1,389 million euro - an increase of 9.6 passed on to the market after a delay. In in 2009, the production facilities for butter percent compared with the first half of 2010 addition, sales of branded cheese were products in Klerken (Belgium) and cheese in (1,267 million euro). The revenue increase under pressure due to economic and political Dronrijp (the Netherlands) closed during the was due to higher prices for commodities developments in a number of countries. first half of 2011. The production has been such as foil cheese, milk powder and butter. Market shares, especially in the premium relocated to other FrieslandCampina The sales volume was lower than in the first segment, came under pressure. The export facilities and some has been out-sourced. half of 2010 primarily due to Friesland­ of cheese under the brand name Frico was Investments were made to expand the Campina terminating a number of adversely influenced by the political unrest cheese production capacity in Workum, supplementary-purchase contracts. in Egypt and Libya. The economic crisis in Balkbrug and Marum (all in the Netherlands). Operating profit rose to -29 million euro (first Greece exerted pressure on revenue. half of 2010: -46 million euro). Operating profit as a percentage of net revenue was FrieslandCampina Butter had an excellent -2.1 percent (first half of 2010: -3.6 percent). first half-year. The operating company succeeded in passing on the necessary price increases to the market. The industrial butter products profitted most from this, the selling price of butter for consumers lagged behind.

Key brands

1 The milk powder activities were transferred from Ingredients to Cheese, Butter & Milkpowder as of 1 January 2011. The comparative figures for 2010 have been adjusted. Royal FrieslandCampina N.V. 13

Ingredients • Higher prices received for the increased demand from Asia for ingredients • Better result from caseinate, pharma lactose and cream liqueur • Investments in capacity expansion for infant & toddler nutrition

2011 2010 2010 first first full half-year half-year year 1

Net revenue 943 812 1,669 Operating profit 89 58 128 Operating profit as a % of net revenue 9.4 7.1 7.7

The Ingredients business group can look FrieslandCampina Kievit’s revenue rose The DMV-Fonterra Excipients joint venture back on a good first half of 2011 with net slightly as a result of higher selling prices had an exceptional six months in which sales revenue of 943 million euro, an increase of and a slight increase in sales volume. The volumes and revenue both increased and the 16.1 percent compared to the first half of result was, however, under some pressure result improved. The company was able to 2010 (812 million euro). The increased due to higher raw materials prices. The respond well to the much higher global revenue is due to both price rises and higher unrest in the Middle East and North Africa demand for pharma-lactose. sales volume. The primary contributor let to a drop in sales of creamers in this towards this was the high demand from Asia region. The higher prices put sales in Asia Investment plans amounting to around for dairy ingredients. The business group under pressure. 70 million euro were approved for the succeeded in passing on the increased price production facility in Beilen - Friesland­ for raw milk and other raw materials to the FrieslandCampina DMV’s performance was Campina’s most important production facility market, albeit with some delay. This led to excellent. Both revenue and result improved for infant & toddler nutrition. The investment operating profit rising by 31 million euro to due to higher selling prices, increased will enable the production capacity to be 89 million euro – an increase of 53.4 percent. demand and improved margins. expanded and the quality to be improved Operating profit as a percentage of net through a variety of upgrades including a revenue amounted to 9.4 percent (first half FrieslandCampina Creamy Creation also had new drying tower, mixing equipment and of 2010: 7.1 percent). a good six months. After a difficult 2010 the packaging assembly line. The production operating company was able to respond to capacity for desalinated whey in the Bedum The revenue and sales volumes of the increasing demand for cream liqueurs. production facility will also be expanded. FrieslandCampina Domo increased. The higher prices for fat could be passed on Especially good progress was achieved by in the selling prices. the infant & toddler nutrition in consumer packaging. The margins on ingredients for FrieslandCampina Dairy Feed can look back infant & toddler nutrition and operating on a satisfactory first half of 2011 in which it profit came under some pressure due to was able to extend its leading position in calf higher raw materials costs which could not feed in the Netherlands. be passed on to customers in full due to on-going sales contracts.

Key brands

1 The milk powder activities were transferred from Ingredients to Cheese, Butter & Milkpowder as of 1 January 2011. The comparative figures for 2010 have been adjusted. 14 Half-year Report 2011

Condensed consolidated income statement In millions of euros first half-year 2011 first half-year 2010

Revenue 4,730 4,328 Other operating income 12 14 Operating income 4,742 4,342

Operating expenses - 4,532 - 4,104 Operating profit 210 238

Share of profit of joint ventures and associates 5 8 Finance income and costs - 40 - 35 Profit before tax 175 211

Income tax expense - 48 - 55 Profit for the period 127 156

Profit attributable to: - providers of member bonds 17 15 - providers of perpetual notes 4 4 - shareholder of the company 78 108 - shareholder and other providers of capital of the company 99 127 - non-controlling interests 28 29 127 156

Condensed consolidated statement of comprehensive income In millions of euros

first half-year 2011 first half-year 2010

Attributable to Attributable to shareholder of shareholder of the company the company and other and other providers of Non-controlling providers of Non-controlling equity interests Total equity interests Total Profit for the period 99 28 127 127 29 156

Effective portion of cash flow hedges 7 7 - 9 - 9 Tax on perpetual notes and member bonds 4 4 4 4 Currency translation differences - 13 - 6 - 19 57 14 71 Other comprehensive income - 2 - 6 - 8 52 14 66

Total comprehensive income for the period 97 22 119 179 43 222 Royal FrieslandCampina N.V. 15

Condensed consolidated statement of financial position In millions of euros 30 June 2011 31 December 2010

Assets Non-current assets Property, plant and equipment 1,500 1,495 Intangible assets 952 903 Financial assets 467 467 2,919 2,865

Current assets Inventories 1,157 1,005 Receivables 1,190 1,124 Cash and cash equivalents 267 292 2,614 2,421

Assets held for sale 11 13 Total assets 5,544 5,299

Equity and liabilities Group equity Issued capital 370 370 Retained earnings and reserves 604 530 Perpetual notes 126 130 Member bonds 957 931 Equity attributable to shareholder of the company and other providers of capital 2,057 1,961 Non-controlling interests 109 110 Group equity 2,166 2,071

Non-current liabilities Provisions 358 343 Non-current interest-bearing borrowings 775 776 Other non-current liabilities 152 38 1,285 1,157

Current liabilities Current borrowings 408 314 Other current liabilities 1,685 1,757 2,093 2,071

Total equity and liabilities 5,544 5,299 16 Half-year Report 2011

Condensed consolidated statement of cash flows In millions of euros first half-year 2011 first half-year 2010 1

This statement shows the cash flows generated by the Company, translated into euros where applicable. Cash flows denominated in foreign currencies are translated into euros at the exchange rates prevailing on the transaction date. The statement of cash flows has been prepared using the indirect method.

Profit before tax 175 211 Depreciation and amortisation of property, plant, equipment and intangible assets 95 106 Movements in inventories, receivables and liabilities - 218 - 251 Other operating activities 11 19 Net cash from operating activities 63 85

Investment in property, plant, equipment and intangible assets - 131 - 75 Other investing activities 12 23 Net cash used in investing activities - 119 - 52

Interest-bearing borrowings drawn and repayments 117 42 Other financing activities - 75 - 93 Net cash used in financing activities 42 - 51

Net cash flow - 14 - 18

Cash and cash equivalents at 1 January 292 272 Net cash flows - 14 - 18 Translation differences in cash and cash equivalents - 11 25 Cash and cash equivalents at 30 June 267 279

1 The comparative figures in the condensed consolidated statement of cash flows differ in specification from the figures as presented in the 2010 Half-year Report. In the 2010 Half-year Report the reserve member bonds was included in the cash flow from financing activities. As of the 2010 Annual Report it has been included as an adjustment to the profit before tax in the cash flow from operating activities.

Condensed consolidated statement of changes in equity In millions of euros

first half-year 2011 first half-year 2010

Equity Equity attributable to attributable to shareholder of shareholder of the company the company and other and other providers of Non-controlling providers of Non-controlling capital interests Total capital interests Total At 1 January 1,961 110 2,071 1,652 97 1,749 Total comprehensive income 97 22 119 179 43 222 Transactions with shareholder and other providers of capital: - dividends paid to non-controlling interests - 23 - 23 - 46 - 46 - amounts paid to providers of perpetual notes -9 -9 -9 -9 - amounts paid to providers of member bonds - 31 - 31 - 31 - 31 - addition member bonds for the year 41 41 36 36 - sale of shares to Zuivelcoöperatie FrieslandCampina U.A. 15 15 - other changes - 2 - 2 1 1 Total transactions with shareholder and other providers of capital - 1 - 23 - 24 - 3 - 31 - 34 At 30 June 2,057 109 2,166 1,828 109 1,937 Royal FrieslandCampina N.V. 17

Notes to the condensed consolidated half-year figures

General Judgements, estimates and assumptions Royal FrieslandCampina N.V. has its registered office in Amersfoort, In preparing the half-year financial figures, management the Netherlands. The address is: Stationsplein 4, 3818 LE, consistently used judgements, estimates and assumptions based Amersfoort, the Netherlands. The consolidated financial on historical experience and various other factors that it believed statements for the half-year ended 30 June 2011 comprise the to be reasonable under the circumstances for the purposes of financial statements of Royal FrieslandCampina N.V. and its making judgements about the carrying values of assets and subsidiaries (jointly referred to as FrieslandCampina). liabilities. Actual results may differ from management’s estimates.

Zuivelcoöperatie FrieslandCampina U.A. is the sole shareholder of The assumptions and estimates are evaluated continuously. For an Royal FrieslandCampina N.V. (the company). overview of the most important assumptions please see the 2010 Financial Statements. During the first half of 2011 there were no The half-year figures in this report have not been audited or major changes, with the exception of an adjustment to the subjected to a limited review. estimate in respect of the depreciation percentages property, plant and equipment (see page 19). Accounting policies This half-year report was prepared in accordance with IAS 34 Financial risk management ‘Interim financial reporting’, insofar as endorsed by the European The most important objectives and procedures of the financial risk Union. This half-year report must be read together with the 2010 management within FrieslandCampina are consistent with the financial statements, which were prepared in accordance with IFRS objectives and procedures presented in the 2010 consolidated as endorsed by the European Union and their interpretations as financial statements. adopted by the International Accounting Standards Board (IASB). Seasonal influences The accounting policies applied in this consolidated half-year There is no significant seasonal pattern when comparing the first report are consistent with the policies for valuation and half and the second half of a year. determination of result and the calculation methods used in preparing the 2010 financial statements. The company has, in Segmentation addition, applied the following new and/or amended IFRS and IFRIC The identified operating segments are the separate segments interpretations: within FrieslandCampina for which financial information is - IAS 24 Related parties; available that is frequently evaluated by the highest decision - IAS 32 Financial instruments: classification of right issues; making body (Executive Board) in order to come to decisions - IFRIC 14 The limit on a Defined Benefits Asset, Minimum Funding regarding attributing the available means to the segment and Requirements and their interaction; determining the performance of the segment. FrieslandCampina - IFRIC 19 Extinguishing Financial Liabilities with Equity has divided the operating segments into business units: Consumer Instruments; Products Europe, Consumer Products International, Cheese, Butter - Improvements to IFRS (May 2011). & Milkpowder and Ingredients. These new standards and amendments to existing standards and interpretations have had no material effect on the equity, result At the beginning of 2011 the milk powder activities of the and/or explanatory notes. Ingredients business group were transferred to the Cheese, Butter & Milkpowder business group. As a result of this transfer the composition of the Ingredients and Cheese, Butter & Milkpowder segments has changed. The comparative figures have been adjusted accordingly. 18 Half-year Report 2011

Notes to the condensed consolidated half-year figures In millions of euros, unless stated otherwise

first half-year 2011

Consumer Consumer Cheese, Elimination and Products Products Butter & Milk- Corporate & Segmentation by business group Europe International powder Ingredients Support Total Sales to external customers 1,445 1,203 1,199 741 142 4,730 Inter-segment sales 244 2 190 202 - 638 Total revenue 1,689 1,205 1,389 943 - 496 4,730

Operating profit 0 192 - 29 89 - 42 210 Share of profit of joint ventures and associates 1 2 2 - 1 1 5 Finance income and costs - 40 - 40 Income tax expense - 48 - 48 Profit for the period 127

Operating profit as a % of revenue 0 15.9 - 2.1 9.4 4.4 Carrying amount of assets employed in operating activities 1,655 475 783 875 1.069 4,857 Carrying amount of other assets 687 5,544

first half-year 2010

Consumer Consumer Cheese, Elimination and Products Products Butter & Milk- Corporate & Europe International powder Ingredients Support Total Sales to external customers 1,382 1,102 1,111 611 122 4,328 Inter-segment sales 212 2 156 201 - 571 Total revenue 1,594 1,104 1,267 812 - 449 4,328

Operating profit 57 197 - 46 58 - 28 238 Share of profit of joint ventures and associates 1 4 2 1 8 Finance income and costs - 35 - 35 Income tax expense - 55 - 55 Profit for the period 156

Operating profit as a % of revenue 3.6 17.8 - 3.6 7.1 5.5 Carrying amount of assets employed in operating activities 1,827 650 1,022 953 101 4,553 Carrying amount of other assets 653 5,206 Royal FrieslandCampina N.V. 19

Notes to the condensed consolidated half-year figures

Operating expenses Intangible fixed assets Operating expenses include the milk payments to member farmers The movements in the intangible non-current assets during the of EUR 1,753 million (first half of 2010: EUR 1,420 million). first half of 2011 can be specified as follows (in millions of euros):

Income tax expense Carrying amount at 1 January 903 The income tax expense was determined using the integrated Additions 12 approach, with the effective tax rate being based on the outlook Transfers 3 for the whole of 2011. The 27.4% tax rate in the first half of 2011 is Currency translation differences 6 higher than the weighted average of 26.4%. This is due to a Amortisation - 8 number of reasons including the non-capitalisation of losses in Change in value in connection with put option 36 Germany and non-deductible withholding tax on received dividends Carrying amount at 30 June 952 from Nigeria, Indonesia and Thailand. During the first half of 2011 the value of the liability in respect of Impairment tests the put option related to DMV-Fonterra Excipients GmbH & Co KG During the first six months of 2011 FrieslandCampina carried out an rose by EUR 36 million. This increase in value has been added to analysis in respect of the goodwill and other non-current assets. the goodwill. On 30 June 2011 the total liability related to the put This test revealed no events that indicated an impairment of option amounted to EUR 115 million and was recognised in other goodwill or other non-current assets during the first half of 2011. long-term liabilities.

Property, plant and equipment Inventories The movements in the balance sheet item property, plant and An amount of EUR 118 million (2010: EUR 245 million) of the equipment during the first half of 2011 can be specified as follows inventories of finished goods and goods for resale was carried at (in millions of euros): lower market value. The write-down amounted to EUR 14 million on 30 June 2011. Carrying amount at 1 January 1,495 Additions 119 Commitments and contingencies Disposals - 2 Commitments and contingencies do not materially differ Currency translation differences - 19 from those included in the most recently published Financial Transfers - 3 statements of 2010. Depreciation - 87 Impairment - 3 Related-party transactions Carrying amount at 30 June 1,500 There were no changes in respect of the nature and size of the related parties compared with the notes to the 2010 financial The useful lives of property, plant and equipment were reviewed as statements. of 1 January 2011 and, in most cases, extended. This change in accounting estimates has resulted in a reduction of depreciation Subsequent events expense over the first half of 2011 amounting to EUR 8.5 million. On 10 July 2011 the production facility of FrieslandCampina WAMCO Nigeria Plc. was flooded as a result of heavy rain. The flooding caused damage most of which is expected to be covered by the insurance.

Amersfoort, 26 August 2011 FrieslandCampina plays an important role in providing food for hundreds of millions of people all over the world on a daily basis. FrieslandCampina’s products include dairy-based beverages, infant & toddler nutrition, cheese, butter, cream, desserts and functional dairy-based ingredients. In addition to consumer products FrieslandCampina also supplies profes­ sional customers, the food industry and the pharmaceutical sector.

FrieslandCampina has more than 130 years of dairy experience. With annual revenue of nearly 9 billion euro FrieslandCampina is one of the world’s largest dairy companies. In the field of consumer products the Company is active in many European countries, in Asia and in Africa. Sales to industrial customers take place worldwide. FrieslandCampina’s own offices and facilities in 25 countries employ a total of over 19,000 people. FrieslandCampina’s products find their way to more than 100 countries.

Royal FrieslandCampina N.V. is owned by Zuivelcoöperatie FrieslandCampina U.A., with 14,800 member dairy farms in the Netherlands, Germany and Belgium.

Royal FrieslandCampina N.V. Stationsplein 4 3818 LE Amersfoort The Netherlands T +31 (0)33 713 3333 www.frieslandcampina.com